The One-Cow State Redux

I’ve written in the past (and have been slagged by Michael Hiltzik) about the insane instability built into California’s fiscal policies because of our overdependence on income taxes from a few high-earners.

Well, California got some good fiscal news this month – collections are projected at $7.5B higher than budgeted – and Virginia Postrel links to a SFGate article by Kathleen Pender:

California took in a record $11.3 billion in personal income tax receipts in April, $4.3 billion more than it collected last April. It’s almost certain that a significant chunk of April’s haul came from Google employees — perhaps one-eighth or more of the tax receipt gain.

Pender continues:

California’s tax structure is highly progressive, which makes it highly volatile. For the 2004 tax year, 38,000 California tax returns reported more than $1 million in income. They represented just 0.2 percent of all state-tax returns, yet they accounted for 14 percent of total adjusted gross income and about 30 percent of the total personal tax.

The top 3 percent of the returns, those with incomes exceeding $200,000, paid about 60 percent of all state taxes.

5 thoughts on “The One-Cow State Redux”

The California tax structure and the Federal tax structure are not all that much different. The Federal Budget surplus of the 90s was fueled by the stock market bubble, and the deficits of the next few years were likewise caused by the popping of that bubble.

Every time the federal tax laws have been changed over the last couple of decades they have been made more dependent on the fortunes of the top tier of earners whose income is highly volatile. We need to shift some of that burden to excise taxes like a VAT or a gasoline tax.